Making Drug Costs More Transparent to Consumers: A Summary for Policymakers C A L I FOR N I A H EALTH C ARE F OU NDATION S tates are taking aim at prescription helping consumers find the lowest drug prices drug prices, a major factor in the escalating cost and other steps they can take to reduce the cost of of health care. According to the Kaiser Family pharmaceuticals. Foundation, pharmaceutical drug costs have been increasing by an average of 8.3 percent per year What Do Consumers Need to Know fact sheet since 1994. Uninsured Americans, who pay 40 to about Prescription Prices? 60 percent more for their drugs than government Today, Americans can buy their prescription or private insurance providers, bear the heaviest drugs not only from local retailers but also burden and are a particular concern for state from online vendors and, in some areas, legally policymakers.1 from international sources. Yet most state price transparency programs have information on local Price transparency is one strategy governments pharmacies only. And just one state site includes are using to try to drive down costs by steering information on the deep discounts for leading consumers to less expensive options. Hospital and generics that several large retail chains now offer. physician costs, the subject of another California (In 49 states, Wal-Mart, Target, and other discount HealthCare Foundation (CHCF) fact sheet,2 are retailers now sell at least 140 generic drugs at deep one focus of price transparency, while another discounts, usually $4 for a 30-day supply.) focus is on prescription drug prices. Comparing drug prices is the simpler of the two for It is important to recognize that there are major consumers, mainly because variations in quality are differences among consumers when it comes to less of an issue. In other respects, however, these drug prices, based primarily on their insurance price transparency initiatives face similar challenges status — just as with hospital and physician costs. in providing consumers with accurate, complete, But some generalizations apply to all of them. To and timely information that is relevant to them as make the best purchasing decisions, consumers individuals. need this core information: K The costs of both name-brand and generic The Center for Studying Health System Change prescription drugs; and (HSC) recently completed a study of pharmacy price transparency for CHCF. 3 It looked at the K Comparative costs charged by all of their ten state programs that in late 2007 were posting purchasing options — local pharmacies, drug price information online (see Table 1). The large retailers, online sources, and HSC report cites examples of useful information international sources. and tools on these sites, but concludes that “extensive gaps in available price information… In addition, the following details add to the utility seriously hamper the effectiveness of the price- of the core information: comparison Web sites.” The authors outline what F ebruary K The date of the reported data; states can learn from these early experiments about 2008 Table 1. States with Drug Price Comparison Web Sites (as of November 2007) Number of Drugs State Price Data (Formulations) Duration of Frequency of (Launch Year) Web Site Address Source as reported by the state* Reporting Period Price Updates Connecticut www.ct.gov/ag/cwp/view.asp?a=2106&q=294076 Medicaid 32 (40) 1 month Monthly (2005) claims Florida www.myfloridarx.com Medicaid 100 (650) 1 month Monthly (2005) claims Maryland www.oag.state.md.us/drugprices/ Medicaid 26 (26) 2 months Monthly (2004) claims Michigan www.michigandrugprices.com Medicaid 150 (306) 6 months Biweekly (2006) claims Minnesota www.state.mn.us/portal/mn/jsp/home.do?agency=Rx Medicaid 400 (700) Since launch Biweekly (2004) claims Missouri www.morxcompare.mo.gov Medicaid 1,300 (5,200) 6 months Bimonthly (2007) claims New Hampshire www.egov.nh.gov/medicine-cabinet/Drug_Listing.asp Medicaid Not available 1 month Monthly (2004) claims New Jersey www.state.nj.us/lps/ca/njpdr/index.htm Medicaid 150 (618) 1 year Weekly (2007) claims New York www.nyagrx.org Price list 155 (158) Not available Monthly (2004) Vermont www.atg.state.vt.us/display.php?smod=185 Medicaid 90 (237) 1 month Monthly (2007) claims Source: HSC analysis of information on state drug price comparison Web sites; supplemental information collected by telephone and email exchanges between HSC researchers and state agency staff or private data contractors. Note: For complete notes on Table 1 data, see original HSC report, State Prescription Drug Price Web Sites: How Useful to Consumers? at www.hschange.org/CONTENT/966/. *Some states count only brand name drugs while others count brand name drugs and generic substitutions separately. Where not provided by the state, the counts of formulations were tallied by HSC researchers. In these cases, some rounding may have been performed. Formulations may include different dosages, quantities, and suspensions of the same drug. K Which pharmacies have policies to match lowest As noted, insured and uninsured Americans typically pay prices; and markedly different prices for their prescription drugs, because insurers (public and private) negotiate lower K Pharmacy contact information (for checking the prices for their enrollees. (A few states negotiate lower accuracy of posted prices). prices for their uninsured populations, as described below.) What consumers need most is price information Finally, having these tools and functionalities available that is specific to their own economic and insurance will help consumers easily use the information: profile, including information about which discounts are K Searching and sorting by drug name (both generic available to them. and name-brands) and geographical area; Existing state initiatives target the uninsured as their K Side-by-side comparisons of the prices from priority audience because they have the greatest need. available sources; and Most post only the full, “usual and customary” prices on K Multi-lingual versions of the information. their Web sites. But many insured consumers also could benefit from knowing their options, especially those with high copayments or whose purchases are not covered by 2  |  California HealthCare Foundation insurance, for example because of the Medicare Part D Recommendations for Policymakers “doughnut hole.” As drug prices escalate and insurers shift State policymakers should carefully weigh the potential more costs onto consumers, states may want to extend benefits and costs of mounting an effective price their price transparency programs to serve more residents. transparency initiative online, especially given the challenges of reaching target audiences. Many state The Challenges of Drug Price Transparency resources are required to provide timely, comprehensive, To be meaningful and useful, prescription drug price accurate, and useful drug price information. And information must be accurate, timely, and comprehensive. the consumers who could benefit most from the information — uninsured people with low incomes — are K Timeliness. Price information that is out of date arguably the least able to get to it because of limited or of indeterminate age has limited usefulness and access to the Internet, among other barriers. undermines trust in a Web site. States have tried different approaches, but none has solved the For states that do choose to go forward, the HSC problem of the time it takes to assemble, post, and study recommends treating price transparency as update price data. part of a broader set of strategies to reduce costs. In K Comprehensiveness. There are thousands of particular, states can leverage their purchasing power of prescription drugs, each with multiple formulations pharmaceuticals to negotiate with manufacturers for drug (dosages and forms of delivery), and drugs are discounts for low-income residents. constantly being added and removed. State Web sites provide price information on shorter lists of the California is taking just such an approach, as exemplified most-prescribed pharmaceuticals — current totals by two bills passed by the legislature in September 2006: range from 26 (Maryland) to 1,300 (Missouri).4 K Assembly Bill 2911 authorizes the state to negotiate with pharmaceutical manufacturers to The HSC report notes the tradeoffs between provide discounted drug prices to people who meet comprehensiveness and timeliness, given limited criteria related to their incomes, insurance status, state resources. The time it takes to provide accurate, and medical expenses. Negotiation is voluntary for up-to-date information means that fewer drugs can be manufacturers for the first three years, after which displayed. certain enforcement tools take effect. The report also points out that states have the option of K Assembly Bill 2877 authorizes the creation by July mandating price reporting by pharmacies. However, no 2008 of a consumer Web site to give consumers state has yet taken this step because of stiff opposition information on their options for finding the most from the pharmaceutical industry. Nine of the ten state affordable prescription drugs. programs rely on Medicaid data, which have many limitations.5 As they create the new Web site, California’s leaders and other states launching drug price transparency initiatives Given these inherent challenges, the users of price can benefit from the experiences of the states that have comparison Web sites would be wise to consider the drug preceded them. First, there are decisions to be made price information they find there suggestive rather than about which audience(s) to serve, which drugs to include, absolute and to double-check the information. which retailers’ prices to include, and which auxiliary information and tools to provide. In making these Making Drug Costs More Transparent to Consumers: A Summary for Policymakers   |  3 decisions and then developing their Web sites, they can Endnotes keep these lessons in mind: 1. Office of the Governor. Press release: “Governor .Be clear about which audience(s) you are serving 1 Schwarzenegger signs legislation to make prescription drugs more affordable for uninsured Californians,” and be sure the price information meets their needs. 9/29/06. 2.Don’t limit the target audience to the uninsured. 2. California HealthCare Foundation, Making Health Care .Provide information on the most-prescribed 3 Costs More Transparent: A Summary for Policymakers, pharmaceuticals. February 2008 (www.chcf.org/topics/view.cfm?itemID=133574). 4.Include information on brand-name and generic drugs. 3. Ha T. Tu and Catherine G. Corey, Center for Studying .Offer comparative costs for all purchasing options, 5 Health System Change, State Prescription Drug Price including any discount programs from large chains Web Sites: How Useful to Consumers? February 2008 that may offer better pricing than a pharmacy benefit. (www.hschange.org/CONTENT/966/). 6.Include supplementary information such as pharmacy 4. California Assembly Bill 2877 directs that the Web contact, date of data, and disclosure about lowest site should include price comparisons of at least 150 matching price programs. commonly prescribed prescription drugs. 5. The tenth state, New York, uses volunteers to collect .Make sure data are current. 7 price lists from retail pharmacies, resulting in what the .Look beyond Medicaid claims as a data source and 8 HSC authors call “severely limited price information.” consider mandatory reporting. 6. Consumer Reports, “Shopper’s Guide to Prescription 9.Provide links to retail pharmacy sites where consumers Drugs, No. 3: Getting the Best Price.” Cited in the HSC have the option of buying their prescription drugs report (note 2); accessed on November 28, 2007. online from non-local suppliers. p r e pa r e d b y 1 0.To diminish the risks of adverse drug interactions Susan Baird Kanaan, editor that might arise from shopping with multiple This fact sheet was drawn from a study published by retailers, encourage consumers to maintain their own the Center for Studying Health System Change and medication records and to ask suppliers about possible commissioned by the California HealthCare Foundation. drug interactions.6 f o r m o r e i n f o r m at i o n c o n ta c t The purpose of this endeavor, of course, is to support California HealthCare Foundation consumers’ health decisions and ultimately to promote 1438 Webster Street, Suite 400 their well-being. As with other price transparency Oakland, CA  94612 initiatives, it is essential to ensure that consumers are tel: 510.238.1040 as well supported as possible in using the information fax: 510.238.1388 beneficially. www.chcf.org 4  |  California HealthCare Foundation